Eighth Circuit Holds that AKS Violations Do Not “Taint” All Claims
The Eighth Circuit Court of Appeals recently issued a notable decision that offers defendants in FCA cases premised on violations of the Anti-Kickback Statute (“AKS”) significant new defenses relating to causation. The panel soundly rejected the government’s position that as a result of the 2010 amendments to the AKS, any claim provided in violation of the AKS is tainted, and therefore “false,” under the FCA. Instead, the Eighth Circuit held that for an AKS violation to render a claim false, the kickback must have been the but-for cause of the submission of the claim. United States ex rel. Cairns v. D.S. Medical LLC, No. 20-3010, 2022 WL 2930946 (8th Cir. July 26, 2022). The decision creates a circuit split with the Third Circuit and given the many courts of appeal that have not weighed in on this question, promises to generate renewed debate in district courts across the country as to the appropriate causation standard in FCA cases involving alleged violations of the AKS.
8th Circuit Reaffirms FRCP 9(b)’s Demanding Pleading Standard
The U.S. Court of Appeals for the Eighth Circuit joined a growing trend among courts in tightening False Claims Act (“FCA”) pleading requirements, affirming the dismissal of a qui tam action brought against a nonprofit hospital because the relators failed to meet the “particularity” standard set forth under Rule 9(b) of the Federal Rules of Civil Procedure. In doing so, the court reminded FCA litigants that Rule 9(b) requires either “representative samples” of false claims plead with adequate specificity, or particular details of a scheme to submit false claims paired with reliable indicia that they were submitted. United States ex rel. Strubbe v. Crawford Cnty. Mem’l Hosp., No 18-1022, 2019 WL 512190 (8th Cir. Feb. 11, 2019). (more…)
Eighth Circuit Holds That Reasonable Interpretations of Ambiguous Regulations Undercut FCA Liability
The Eighth Circuit recently affirmed a district court’s grant of summary judgment because the “defendant’s reasonable interpretation of an ambiguous regulation ‘belies the scienter necessary to establish a claim of fraud under the FCA.’” The opinion further reinforces a similar ruling the Eighth Circuit released last week (as reported here) and rejects objections from DOJ that such a holding “absolves defendants of liability whenever they can justify their conduct with a plausible post-hoc interpretation of an ambiguous law.” United States ex rel. Donegan v. Anesthesia Assoc. of Kansas City, No. 15-2420 (8th Cir. Aug. 12, 2016).
Eighth Circuit Holds That A Reasonable Interpretation of an Ambiguous Statute Does Not Give Rise to FCA Liability
On August 8, 2016, the Eighth Circuit affirmed the dismissal of a FCA complaint against the University of Minnesota Medical Center (“UMMC”) alleging that UMMC improperly characterized the children’s unit of its hospital as a “children’s hospital”– a term not defined in the relevant statute – in order to avoid a decrease in Medicaid reimbursements under a recent statutory amendment. The Court held that UMMC’s lobbying efforts with the Minnesota Department of Human Services (“MDHS”) to classify itself as a “children’s hospital” under that amendment, and corresponding claims for Medicaid reimbursement, could not be characterized as “false” under the FCA.
Eighth Circuit Limits A Relator’s Right To Recovery Only To Those Portions Of A Settlement Attributable To His Claims
Last month, the Eighth Circuit, sitting en banc, overturned a district court’s decision to grant two qui tam relators a share of an FCA settlement that resolved multiple claims, including some claims allegedly unrelated to the relators’ complaint. Rille v. Pricewaterhouse Coopers LLP, et al., No. 11-3514, 2015 WL 5778810 (8th Cir. Oct. 5, 2015). Joining the Sixth Circuit, the Eighth Circuit held that the FCA only entitles a relator to share in the portion of the settlement attributable to the claims that he or she brought. Id.
8th Circuit Affirms Dismissal of FCA Claim, Offering Guidance on the Application of the Public Disclosure Bar
On August 7, 2014, the Eighth Circuit affirmed the dismissal of a qui tam False Claims Act suit, and in doing so offered helpful guidance regarding the proper application of the public disclosure bar (while highlighting an open issue regarding public disclosure). The court also addressed whether consideration of materials outside of the pleadings automatically requires the court to treat a motion to dismiss on public disclosure grounds as a motion for summary judgment.
Regulatory Violations – Standing Alone – Again Rejected As Sufficient To State FCA Claim
Posted by Jaime Jones and Brenna Jenny
The Eighth Circuit Court of Appeals recently reaffirmed that mere regulatory noncompliance, standing alone, is not sufficient to establish False Claims Act liability for claims submitted to Medicare. Rather, the court held, a relator must allege facts tying a defendant’s alleged conduct to Medicare’s expectations regarding material conditions of payment. See United States ex rel. Ketroser v. Mayo Found., No. 12-3206 (8th Cir. Sept. 4, 2013).
In the Ketroser case, relators alleged that the defendant violated the FCA when it submitted one written report, rather than two, as part of a pathology analysis incorporating a two-stage testing process. According to relators, because the CPT codes for the tests were both included in a section of the Medicare Codebook that required “reporting,” Medicare expected Mayo, to create two separate written reports. Mayo responded that it created a written report of the first test, and more broadly “reported” the results of the second test through oral communications between physicians and supplemental written comments as needed.
The court affirmed the district court’s dismissal of the claim based on relators’ failure to submit any “specific evidence” that Medicare considered separate written reports to be a material condition of payment. In this regard, the court joined other Circuits, including the Second, Fifth, Sixth, Seventh, and Ninth, in holding that pleading a “claim of regulatory noncompliance” does not satisfy FCA pleading requirements.
Furthermore, the court suggested that even if Medicare had expected a separate written report as a condition of payment, the Codebook’s “reporting” requirement was ambiguous, and Mayo’s reasonable interpretation negated any inference that Mayo had “knowingly” submitted a false claim. As other courts have held (see related posts here and here), the Eighth Circuit reiterated that where a defendant’s “interpretation of the applicable law is a reasonable” one, relators fail to plead the requisite scienter under the FCA.
Eighth Circuit Allows Recovery By Two Whistleblowers On a Claim That Wasn’t Part of the Original Suit
Posted by Kristin Graham Koehler and Amy Markopoulos
Relators may be able to recover on claims additional to those they originally brought if the additional claims are closely related and would not otherwise have been discovered. The Eighth Circuit held on March 1, in Rille et al. v. Accenture, LLP et al., No. 11-2054 (8th Cir. 2013), that two whistleblowers were entitled to 15 percent of the federal government’s settlement with Hewlett-Packard Co. (“HP”) even though the claim was not part of the original suit they filed. The relators initially alleged that HP engaged in unlawful kickback and defective pricing schemes in its sale of computer equipment to the federal government. The United States intervened in the action and reached a $55 million settlement with HP, allocating $9 million of the settlement to the kickback scheme and $46 million to the defective pricing scheme. The district court awarded the relators a 21% share of the kickback settlement and a 15% share of the defective pricing settlement.
The government then sued to prevent the two whistleblowers from receiving part of its recovery from the qui tam action. The government claimed, inter alia, (1) that the relators’ defective pricing claim was a different defective pricing claim than the one settled, and (2) that the government learned about the conduct through HP’s voluntary disclosure and not from the relators’ qui tam. The trial court found that the government would have had no knowledge of the defective pricing scheme other than from the whistleblowers’ suit. The Eighth Circuit upheld the trial court’s decision, finding that the whistleblower’s defective pricing claim was sufficiently related to the original action to justify the relators’ share of the settlement. The dissent argued, however, that the False Claims Act allows the relator to “recover only from the proceeds of the settlement of the claim that he brought.”
Although, as here, very similar facts would be required for a whistleblower to recover on a claim different from the one actually brought, this case illustrates an expansion of the statute in favor of relators, which will likely only serve to embolden the whistleblowers’ bar.